Time heals? Assurance avoids

Broc Romanek, editor at the Corporate Counsel has just posted an extract from the WSJ article, announcing the White House's plan to nominate two commissioners to the SEC. The first name should be well known to the XBRL community. Commissioner Luis Aguilar was the only commissioner to vote against the XBRL final rule.

We should remember why.

Commissioner Aguilar supported the goals and objectives of the SEC's Interactive Data (XBRL) program, and supportive of the proposal put forward, except for one aspect - the lack of an assurance requirement. Of course, with a 4:1 split on the vote, he could safely vote against the Rule without endangering its passage by the Commission.

But the rationale for his vote should be considered by anyone who thinks that the SEC might provide an extension to the two year liability relief provision of the Rule.  In December 2008 I wrote (and quoted from Commissioner Aguilar's comments):

Only Commissioner Aguilar had the courage to vote against the rule, declaring that this was the first time in history he has seen the SEC weaken protections for investors:

I am not prepared to reduce the level of protection that I believe investors are entitled to. Using new technology to improve disclosure is a good thing — but not when it dilutes investor protection. In these times of market turmoil, investors need to know the SEC is looking out for them.

Let me quickly say that I have always been, and remain, deeply convinced that XBRL can and will revolutionize business reporting, both internal and external, and that XBRL has the ability to deliver incredible efficiencies across the business reporting supply chain. And let me add that, in the long run, the SEC’s action last Wednesday represents a major step forward toward the full implementation of XBRL for financial reporting in the United States.

The good news is that two years have passed, and the first wave of filers (the group-1 or phase-1 or year-1 or whatever) are now leaving the protective covering of that litigation relief, and will now be liable for the content of their XBRL.

Lets look again at Commissioner Aguilar's final comment:

"It departs from our best traditions,and shackles investors with the risks and costs arising from errors and misstatements in interactive data, even though issuers control the process of preparing the disclosure and are in the best position to ensure its accuracy and reliability."

Returning Commissioner Aguilar to the SEC will be good for the SEC, good for XBRL, and I am very pleased to see his re-nomination.

Equally, returning Commissioner Aguilar should serve as fair warning that it will be very difficult to get an extension to the liability relief through the Commission, and no filer should expect to see such a deferment.

Time, they say, heals all - and indeed the XBRL world has had two years to figure out how to provide assurance over XBRL. But at what cost. Stay tuned...